Strong US Dollar Suppressing US Exports? Yellen Refutes Trump: "It's Not as Simple as You Think"

After a series of meetings with global financial officials in Rio de Janeiro, U.S. Treasury Secretary Yellen responded to former President Trump's argument that a strong dollar harms American manufacturing by saying that the issue is far more complex than Trump described.

The Treasury Secretary stated that Bidenomics provides balanced support for the economy, with strong consumer and investment spending. She mentioned that the plans implemented, such as individual retirement accounts and infrastructure construction, have created a large number of manufacturing jobs.

Yellen pointed out that the strength of the U.S. economy has attracted foreign capital, leading to an increase in the value of the dollar. The Federal Reserve's measures to curb inflation have resulted in interest rates higher than other countries, creating upward pressure.

She emphasized the G7's long-standing commitment to market-determined exchange rates and highlighted the need to consider the impact of a strong dollar in a broader context. Yellen downplayed the role of international trade in disrupting U.S. factory employment, stating that there are multiple factors behind the strength of the dollar.

In contrast, Trump, in a media interview, stated, "We are facing a serious currency problem... No one wants to buy our products because they are too expensive."

He reiterated his claim that some of the largest U.S. trading partners conspire to keep their currencies low against the dollar, creating unfair advantages. His running mate, Vance, suggested that a devaluation of the dollar would inject a shot in the arm for U.S. manufacturers.

This quarter, the U.S. economy unexpectedly rebounded, with industrial output, accounting for three-quarters of U.S. industrial production, reaching its highest level since 2018 last month. Business investment grew at the fastest pace in nearly a year, with equipment investment showing the strongest growth, reaching a new high since early 2022.

Yellen mentioned that although manufacturing jobs in the U.S. have steadily declined over the past few decades, the share of manufacturing in GDP has remained relatively stable. The decrease in employment is more due to productivity improvements rather than trade.

A week before the release of the July employment report in the U.S., Yellen expressed optimism about the overall labor market, describing it as "strong, stable, and not overheated, operating near the natural unemployment rate." With the Federal Reserve gradually bringing inflation down to the target of 2%, Yellen believes that the risks of inflation and employment are now balanced